Millions of households are being advised to change their energy provider due to an increase in winter prices. The energy regulator, Ofgem, has raised the price cap by 2% starting today, resulting in the average gas and electricity bill reaching £1,755 annually. This hike coincides with the colder weather, leading to higher energy consumption at the elevated rates.
Experts suggest that approximately 34 million customers who are still on standard variable tariffs, affected by the price cap, could make significant savings by switching to fixed-rate deals. MoneySuperMarket, a price comparison website, indicates that the average customer could save up to £271 by making this switch. The current best deals in the market range from around £1,429 to £1,643.
Laura Hinton from MoneySuperMarket Energy noted that a majority of households, around 66%, are on standard variable rates, which will result in increased bills during the winter months as energy usage rises. In light of this, consumers are encouraged to explore better deals below the price cap, preferably shorter than 12 months and without substantial exit fees.
Debt charity StepChange highlighted a 32% increase in energy-related arrears among its clients over the past two years. Simon Trevethick, the head of communications at StepChange, emphasized the financial challenges faced by households, especially with the escalating costs of energy bills.
Ofgem’s price cap adjustment will translate to an average increase of just over £35 per year for a typical dual fuel customer on monthly direct debit payments. Out of the 34 million customers affected by the price cap, about 20 million are on direct debit, while approximately eight million pay upon receiving their bills, and six million use pre-payment meters. The trend is shifting towards fixed tariffs, with nearly 20 million accounts now on fixed-rate plans.
Industry experts at Cornwall Insight foresee a reduction in the price cap to £1,725 per year for a typical dual fuel household starting in January. However, they anticipate a subsequent £100 increase in April next year. This projection underscores the need for households to proactively manage their energy expenses.
Energy Consumers Minister, Martin McCluskey, announced initiatives to support vulnerable families during winter, including expanding the Warm Home Discount to more than six million households. Additionally, plans for a substantial home upgrade program are in the works to enhance energy efficiency and affordability for up to five million homes.
Wholesale gas costs remain significantly higher following geopolitical events, emphasizing the importance of transitioning to renewable energy sources for cost stability and environmental sustainability. Consumers are advised to consider energy-saving tips to reduce their bills, such as optimizing heating controls, insulating walls, and managing energy usage efficiently.